Category: Taxation

  • Indonesia Plans Cigarette Tax Hike

    Indonesia Plans Cigarette Tax Hike

    Photo: Taco Tuinstra

    The Indonesian government is planning to raise the nation’s cigarette excise tax rates in an effort to reduce smoking prevalence, particularly among children, reports Tempo. The amount of the increase has not yet been determined.

    “If we look at the data in 2019, it (the smoking prevalence among children) was still 9.1 percent. So there’s still quite a lot to be dropped,” said Titik Anas, the Finance Ministry’s special staffer for sectoral fiscal policy.

    “The price of cigarettes in Indonesia is actually higher compared to the Philippines, Thailand and Vietnam. But if we compare it with Singapore and Malaysia, it is still relatively cheap.” Titik also warned that the government must be careful in increasing the cigarette excise tax as it will potentially spur illicit cigarette trade.

  • Thailand to Reform Excise Structure

    Thailand to Reform Excise Structure

    Photo: somchai20162516

    Thailand is preparing to change its excise structure for cigarettes, reports The Bangkok Post.

    At present, the law applies a 20 percent tax to the retail price for packs costing up to THB60 ($1.83). If the retail price exceeds THB60 per pack, a 40 percent tax rate is applied.

    A new flat tax rate of 40 percent was scheduled to be applied since October 2019, regardless of the retail price, but there has been opposition from some stakeholders.

    This prompted the ministry to put off its enforcement until Sept. 30 this year in order to review the tax.

    Excise Department director-general Lavaron Sangsnit said the new structure aims to strike a balance between farmers’ income, public health, government revenue and efforts to prevent smuggling.

    He said the new structure is designed to discourage people from smoking and simultaneously thwart the smuggling of foreign cigarettes, which avoid the payment of duties.

    Since the adoption of the two-tier cigarette tax structure in 2017, the department’s excise revenue from cigarettes has fallen from THB68.6 billion to THB62.9 billion in 2020, according to a Bangkok Post source who requested anonymity.

    The department collected cigarette tax of THB37.8 billion during the first seven months of fiscal 2021.

  • Tobacco Tax Hike Clears German Upper House

    Tobacco Tax Hike Clears German Upper House

    Photo: Sebastian H

    Germany’s upper house of parliament, the Bundesrat, on June 25 approved tobacco tax reform legislation, which includes tax hikes on both traditional cigarettes and next-generation products, reports the Berliner Zeitung. 

    In 2022 and 2023, the tobacco tax on a pack of 20 combustible cigarettes will increase by an average of €0.10 ($0.12) each year; in 2025 and 2026, it will go up by another €0.15 each year. A pack of branded cigarettes currently costs around €7 in Germany, which last raised its tobacco taxes in 2015.

    Manufacturers are likely to pass the higher taxes on to consumers.

    Around one in four German adults regularly smokes cigarettes. Health activists had called for significantly higher tobacco tax hikes. The German Cancer Research Center, for example, said the rate would have to increase by at least 10 percent to make a significant dent in smoking. The increases approved by the Bundesrat amount to 3 percent and 4 percent, respectively.

    Tobacco taxes earned Germany €14.7 billion in 2020. Without a tax increase, the tax authorities had forecast tobacco tax revenues of €14.1 billion for 2022; with the rules that have now been adopted, they anticipate almost €16 billion.

    The tax increase disproportionally targets e-cigarettes and the consumables for tobacco-heating devices—a feature that has attracted considerable criticism from the vapor industry and tobacco harm reduction advocates, who believe such products should be taxed comparatively lightly because they are believed to be less harmful than combustible cigarettes.

    SPD politician Michael Schrodi rejected such criticism by pointing out that novel tobacco products have been taxed at low rates to date. “Now they are being taxed appropriately because they too are a health hazard and are potentially addictive,” he said.

  • Study: Tax Hikes Boost Big Brands

    Study: Tax Hikes Boost Big Brands

    Photo: Tobaco Reporter archive

    Tax hikes can disproportionately favor bigger brands while tightened restrictions can hurt them, according to a new study by the UBC Sauder School of Business reported by Medical Express.

    Researchers examined U.S. cigarette sales data from 2005 to 2010 and retail scanner data from 2006 to 2010. They also analyzed a comprehensive dataset that comprised state-level cigarette taxes, state-level smoking restrictions and national anti-smoking advertising campaigns.

    After modeling each smoker’s brand and purchase quantity, the researchers looked at how the taxes, restrictions and ad campaigns influenced their decisions across different brands and price tiers.

    They found that while tax hikes may reduce overall sales, big brands’ market shares tend to increase at the expense of smaller competitors.

    “Market leaders such as Marlboro were able to absorb more taxes and pass less cost down to their consumers,” said UBC Sauder Assistant Professor Yanwen Wang, who co-authored the study. “So, when consumers look at the prices, it seems like Marlboro has raised prices less when compared to smaller brands.”

    Conversely, smoking restrictions seem to hit bigger brands harder—likely because they take away smoking’s brand-driven “cool” factor. With fewer places to light up, it becomes harder for consumers to signal who they are through smoking, which in turn reduces the incentive for smokers to purchase higher equity brands.

    The study also shows that while the taxes may help governments boost their bottom lines, ultimately, smokers pay a heavier price. In fact, the researchers found that a 100 percent tax hike leads to a 30 percent increase in the rate of smokers quitting, but it puts the cost on consumers—and only lifts overall tobacco tax revenue by roughly 28 percent because of declining sales.

    In contrast, strong smoking restrictions boost quit rates by 9 percent and reduce tax revenues by 6 percent—so while consumers may experience some inconvenience in terms of where they can smoke, they don’t shoulder the economic costs.

  • Germany Approves Tobacco Tax Hike

    Germany Approves Tobacco Tax Hike

    Photo: JFL Photography

    The Bundestag on June 11 approved legislation to make smoking in Germany more expensive as of next year, reports Iamexpat. The tax on a pack of 20 cigarettes will rise by an average of €0.10 ($0.12) in 2021. A year later, a further €0.10 will be added, and in both 2025 and 2026, another €0.15 per pack will be added.

    The greatest increases, however, have been reserved for e-cigarettes and tobacco-heating products, which were previously only lightly taxed.

    Currently, a 10 mL bottle of vape liquid costs around €5 in Germany. In 2022, an extra €1.60 will be added to this price in taxation, and this will rise to €3.20 by 2026. An additional tax is also to be introduced for heated-tobacco, so that in the future, it will be treated similarly to cigarettes for tax purposes.

    Vapor industry representatives slammed the tax hikes, arguing that their products contain significantly fewer harmful substances than tobacco cigarettes and should therefore be taxed at lower levels.

    The Association of the E-Cigarette Trade (VdeH) warned that the move would not only prompt vapers to revert to smoking but also destroy numerous small and medium-sized businesses.

    “The mere fact that e-cigarette liquids are generally taxed more heavily than tobacco cigarettes and thus ignore the 95 percent lower potential for damage is insane health policy,” said VdeH Managing Director Michal Dobrajc in a German-language statement. Taxing nicotine-free products as well as cigarettes defies common sense, he added.

    Dobrajc said Germany should learn from the experience of other countries that were forced to lower their vapor taxes as vapers returned to smoking and anticipated revenues failed to materialize.

    “The Tobacco Tax Modernization Act is a disaster in both health and economic terms,” said Dobrajc. “If you are serious about reducing the smoking rate, then you have to support the industry that is making a significant contribution to reducing it instead of destroying it.”

    The Alliance for Tobacco-Free Enjoyment said that it intends to go to the Federal Constitutional Court to file a complaint against what it sees as a disproportionate tax increase.

    Around one in four adults in Germany smokes regularly. Last year, tobacco taxes contributed approximately 14.7 billion to the government’s coffers. The last time the tobacco tax was increased was in 2015.

  • Philippines Recognized for Tobacco Tax Policy

    Philippines Recognized for Tobacco Tax Policy

    Photo: junpinzon

    The Philippines scored highest among its Association of Southeast Asian Nations peers in a study that rated cigarette tax policy performance from 2012 to 2018, reports The Manila Times.

    After evaluating cigarette taxation in more than 170 countries, the authors of the Tobacconomics Cigarette Tax Scorecard study said the Philippines was among the countries “with the greatest improvement in cigarette tax policy,” resulting from “the simplification of previously complicated tiered cigarette excise tax structures, accompanied by large tax increases.”

    During the studied period, the Philippines eliminated the multi-tiered structure of the previous system, removed price classification fees and introduced automatic indexation, according to Finance Assistant Secretary Teresa Habitan. It also increased taxes on tobacco products and mandated an across-the-board uniform tax rate of PHP30 ($0.62) per pack beginning 2017.

    The study used data from the World Health Organization and focused on four aspects of cigarette tax systems: cigarette prices, changes in cigarette affordability over time, share of taxes in retail cigarette prices and cigarette tax structure.

    The Tobacconomics Scorecard’s five-point grading system is derived from the data in the tax/price-related appendices of the biennial WHO Report on the Global Tobacco Epidemic.

    The WHO report monitors the most effective and cost-effective government interventions—both price and nonprice measures—for reducing tobacco consumption.

  • Lawmakers Propose Federal Vapor Tax

    Lawmakers Propose Federal Vapor Tax

    Photo: Innovated Captures

    Lawmakers have introduced into the U.S. Senate a bill that would establish a federal tax on vaping products and increase the traditional tobacco tax rate for the first time in a decade, reports CStoreDecisions.

    The Tobacco Tax Equity Act of 2021 aims to “close tax code loopholes for tobacco products by increasing the federal tax rate on cigarettes, pegging it to inflation to ensure it remains an effective public health tool and setting the federal tax rate for all other tobacco products at this same level.”

    “Tobacco-related disease accounts for one out of every five deaths in America, and I know that story firsthand,” Senate Majority Whip Dick Durbin was quoted as saying. “Data shows that the most effective strategy to prevent children from starting this deadly habit is to price it out of their range. This bill would help reduce tobacco and e-cigarette use by ending loopholes that the industry has exploited to target our children. If America can kick its nicotine addiction, it would go a long way to improving our public health for generations to come.”

    “Loopholes in our tax code continue to favor big tobacco while the American public, especially our youth, pays the price,” said Representative Raja Krishnamoorthi. “The Tobacco Tax Equity Act increases taxes on cigarettes and finally imposes taxes on the e-cigarettes hooking our children on nicotine, which would generate billions of dollars in federal revenue. As a father of a high schooler and middle schooler, I’m determined to make sure we end the youth nicotine and vaping epidemic.”

    According to CStoreDecisions, The Tobacco Tax Equity Act of 2021 is endorsed by the Campaign for Tobacco-Free Kids, the American Academy of Pediatrics, the American Lung Association, the American Heart Association, the American Cancer Society Cancer Action Network, the American Public Health Association, the National Association of County and City Health Officials, the Trust for America’s Health and the American Thoracic Society.

  • Vape Group to Protest German Tax Plans

    Vape Group to Protest German Tax Plans

    Photo: Nikolaus Bader from Pixabay

    Germany’s planned e-cigarette tax is a health policy disaster that will destroy jobs and boost black market sales without generating significant additional revenues, according to the country’s e-cigarette trade association VdeH.

    Under the plans, e-liquids will attract a tax of €4 per 10 mL bottle from July 1, 2022. On Jan. 1, 2024, the tax will increase to €8 plus VAT, i.e., €9.52 per 10 mL bottle. Based on an average sales price of about €5 per bottle, this amounts to a tripling of the retail price, says VdeH.

    On April 21, the VdeH plans to protest the plans by projecting statements from scientists and consumers supporting its position on a 20 x 35 meter “hydro shield” at the Reichstag waterfront in Berlin.

    “The planned excessive taxation means that the 95 percent less harmful e-cigarette will soon be more expensive than conventional cigarettes,” says Michal Dobrajc, managing chairman of the VdeH, in a press note. “With 11 million smokers still in Germany, the e-cigarette is the greatest health policy opportunity we have—we must use it. The planned tax would have exactly the opposite effect.”

    The tax plans, which fail to consider the expected market slump of 50 percent when calculating tax revenue, would take the level of vapor product taxation in Germany to five times the EU average, according to the VdeH.

    The law would not only shift consumption back to more harmful tobacco cigarettes but also sacrifice the entire industry to the black market, the trade group cautions.

  • Estonia Suspends E-Liquid Taxation

    Estonia Suspends E-Liquid Taxation

    Photo: Makalu from Pixabay

    Estonia’s parliament recently voted to suspend the nation’s excise tax on e-liquid between April 1, 2021, and Dec. 31, 2022, to reduce cross-border and illicit trade. The Estonian excise duty on e-liquid has been €0.2 ($0.24) per mL since 2018.

    “Suspending the collection of excise duty will make it possible to lower the price of e-liquids and thus offer consumers controlled and safe products at a lower price,” said Tarmo Kruusimae, parliament member and chairman of the parliament’s Smoke Free Estonia Support Group.

    “It has the potential to become a success story if we manage to reduce both the illicit trade and cross-border trade and at the same time offer less harmful alternatives to cigarettes at a more competitive price.”

    The group estimates that about 62 percent to 80 percent of the Estonian e-liquid market comprises self-mixed, cross-border and smuggled e-liquids primarily from Latvia and Russia. The e-liquid black market strengthened in 2019 when Estonia implemented a tobacco and vapor product flavor ban.

    Tobacco harm reduction advocates welcomed Estonia’s decision. “Estonia’s example with over-taxation of e-liquids should definitely be an educational experience for other countries,” said Ingmar Kurg, CEO of NNA Smoke Free Estonia and a member of the International Network of Nicotine Consumer Organizations, in a statement.

    “If laboratory-tested and legal products are made too expensive for consumers, they will look for solutions in the black market, self-mixing and cross-border trade. Some people give up e-cigarettes and return to smoking, which happened in Estonia.”

  • WHO Touts Benefits of Tobacco Taxation

    WHO Touts Benefits of Tobacco Taxation

    Image: Tobacco Reporter archive

    The World Health Organization (WHO) has released a new technical manual on tobacco tax policy and administration that shows countries ways to cut down on more than $1.4 trillion in health expenditures and lost productivity due to tobacco use worldwide.

    According to the global health body, improved tobacco taxation policies can also be a key component of “building back better” after Covid-19, where countries need additional resources to respond and to finance health system recovery.

    “We launched this new manual to provide updated, clear and practical guidance for policymakers, finance officials, tax authorities, customs officials and others involved in tobacco tax policy to create and implement the strongest tobacco taxation policies for their specific countries,” said Jeremias N. Paul Jr., unit head for the fiscal policies for health team in the health promotion department at the WHO.

    “We hope this document sheds light on the significant advantages to raising tobacco taxation. The data and insights provided here should be an eye opener for policymakers worldwide,” he said.

    Only 14 percent of the world has enough tax on tobacco, according to the WHO.

    “In 2018, only 38 countries covering 14 percent of the global population had sufficiently high tobacco taxes—which means taxing at least 75 percent of the price of these health-harming products,” the organization wrote in a press note. “By implementing proven policies like tobacco taxes, the costs created by the tobacco industry to local communities and nations can be avoidable.  It is a win for population health, revenue and for development and equity.”